It was a volatile week for stocks as technology shares led a market decline on Wednesday and Thursday. The S&P 500 index broke through its 50-day and 200-day moving averages before rallying and retaking the 200-day MA on Friday. The Nasdaq Composite also narrowly recovered its 200-day MA on Friday by 7 points. The Dow Jones Industrial Average bounced well above its 200-day MA, while the more volatile Russell 2000 Index closed below its 200-day MA. Oversold conditions this week indicate short-term selling has reached exhaustion.
Although the Nasdaq led the selling, it led performance on the week following a strong technology rally on Friday. It lost 3.74 percent on the week. The Dow Transports fell 6.40 percent. The S&P 500 Index and Dow Jones Industrial Average declined 4.11 and 4.19 percent respectively, while the Russell 2000 Index slid 5.23 percent.
SPDR Consumer Discretionary (XLY) fell 3.35 percent, SPDR Healthcare (XLV) 3.41 percent and SPDR Technology (XLK) 3.79 percent. SPDR Financial (XLF) and Industrial (XLI) underperformed with losses of 5.61 and 6.37 percent. Technology and consumer discretionary are still trailing in the fourth quarter, while financials and healthcare are leading the larger sectors.
Defensive sectors outperformed by a wide margin this week. SPDR Utilities (XLU) fell only 1.27 percent, SPDR Consumer Staples (XLP) 1.98 percent.
iShares MSCI Emerging Markets (EEM) fell 1.47 percent, iShares MSCI EAFE (EFA) 3.85 percent and SPDR S&P 500 (SPY) 4.10 percent. The U.S. Dollar Index weakened by 0.30 percent and slightly more versus emerging market currencies.
Small-business confidence eased from its all-time high in September but remains near the 45-year high. Producer prices rose 0.2 percent in September, as expected. Both the headline and core CPI missed expectations again in September, rising only 0.1 percent. The Atlanta Federal Reserve hiked its GDP growth forecast for the third quarter to 4.2 percent this week.
Market gyrations this week overshadowed a strong start to earnings season. J.P. Morgan (JPM) delivered $2.34 per share, better than the $2.25 expected. Rising interest rates lifted returns on the bank’s assets and net interest margin increased to 2.51 percent from 2.46 percent in the prior quarter. Citigroup (C) also beat estimates, while Wells Fargo (WFC) missed by a penny. Delta Air Lines (DAL) earned $1.80, better than the $1.74 consensus forecast. Increased travel and higher fares offset rising fuel costs. Shares gained 4.7 percent on Thursday and Friday following the report.